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In April 2010 I received an email that said, “I’m an incoming
Stanford student in the fall and working on a project that a
number of people suggested I get in touch with you about.”

Ok, I get a lot of these. Is this some grad student or post doc
who wanted to do some independent study?

The email continued, ”The problem I’m working on is that
many founders are either making uninformed decisions or
inefficiently learning the new skills they need. The solution I’m
exploring is a just in time learning methodology that accelerates
founders’ learning curve by aggregating relevant content, peers
and mentors.”

Hmm, now I’m getting intrigued. This sounded like one heck of an
interesting guy and it’s a subject I care about. I wondered where
he got his MBA from?

The email closed by saying, “The project is a hybrid between
academic and entrepreneurial circles and I’d really love to begin
a dialogue with people in the academic world also interested in
solving this problem. Your name has come up a lot in that regard.
Let me know if this interests you and if you have any time to
speak.”

It was signed Max Marmer.

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I set up a meeting and at Cafe Borrone some kid who
looked 18-years old came up to me and introduced himself as Max.
“How old are you? I asked. “18,” he replied.

Holy sx!t.

When I asked Max why he was interested in solving entrepreneurial
education problems he replied, “I was always interested in big
picture trends for where the world is headed. I spent time with
organizations like the Institute for the Future and Singularity
University. My conjecture became that the world’s biggest problem
isn’t poverty or disease or any oft-stated major problem, but
that we don’t have enough people engaged in trying to solve these
problems. A big piece of the solution lies in the scalable impact
of entrepreneurship and an increase
of successful entrepreneurs. But potential
impact consistently fails to be realized because of
self-destruction.”

I don’t think I touched my sandwich. I tried to remember what I
was doing at 18 and whatever it was I wasn’t this. Max continued,
“That’s why I’m really interested in ways of optimizing the
entrepreneurship ecosystem to allow more entrepreneurs to go from
idea to reality. To do this requires: a methodology, tools and
systematically reducing friction.”

I was feeling pretty old. Max set the record for smarts divided
by age.

Tune In, Turn On, Drop Out
Max entered Stanford in the fall of 2010 as a freshman, took as
many of the engineering entrepreneurship classes as he could and
independent study with me. (He was part of the Sandbox network - a group of incredibly smart
under 30 year olds.)

Max dropped out of Stanford after his first quarter.

But he left to work on what he told me he came to do - crack
the innovation code of Silicon Valley and share it with the rest
of the world. He set up Blackbox.vc, a seed accelerator for
technology startups (and one of the tour stops for entrepreneurs
from around the world.) They went to work gathering deep
knowledege of what makes successful Internet startups.

Max and his partners interviewed and analyzed over 650
early-stage Internet startups. Today they released the
first Startup Genome Report— a 67 page
in-depth analysis on what makes
early-stageInternet startups successful.

Startup Genome Report
Some of their key findings:

1.Founders that learn are more
successful: Startups that have helpful mentors, track
metrics effectively, and learn from startup thought leaders raise
7x more money and have 3.5x better user growth.

2. Startups that pivot once or twice times raise 2.5x more
money, have 3.6x better user growth, and are 52% less likely
to scale prematurely than startups that pivot more than 2 times
or not at all.

3. Many investors invest 2-3x more capital than
necessary in startups that haven’t reached problem
solution fit yet. They also over-invest in solo founders and
founding teams without technical cofounders despite indicators
that show that these teams have a much lower probability of
success.

4. Investors who provide hands-on help have little or no
effect on the company’s operational performance. But
the right mentors significantly influence a company’s performance
and ability to raise money. (However, this does not mean that
investors don’t have a significant effect on valuations and
M&A)

5. Solo founders take 3.6x longer to reach scale
stage compared to a founding team of 2 and they are
2.3x less likely to pivot.

6. Business-heavy founding teams are 6.2x more likely to
successfully scale with sales driven startups than with
product centric startups.

7. Technical-heavy founding teams are 3.3x more likely to
successfully scale with product-centric startups with no network
effects than with product-centric startups that have
network effects.

8. Balanced teams with one technical founder and one business
founder raise 30% more money, have 2.9x more user growth and
are 19% less likely to scale prematurely than technical or
business-heavy founding teams.

9. Most successful founders are driven by
impact rather than experience or money.

10. Founders overestimate the value of IP before product
market fit by 255%.

11. Startups need 2-3 times longer to validate their market
than most founders expect. This underestimation creates
the pressure to scale prematurely.

12. Startups that haven’t raised money over-estimate their
market size by 100x and often misinterpret their market
as new.

13. Premature scaling is the most common reason for startups
to perform worse. They tend to lose the battle early on
by getting ahead of themselves.

14. B2C vs. B2B is not a meaningful segmentation of
Internet startups anymore because the Internet has changed the
rules of business. We found 4 different major groups of
startups that all have very different behavior regarding customer
acquisition, time, product, market and team.

———

I’m not sure I believe every one of the report conclusions – it
just covers very early stage web startups, and the
methodology is still shaky – but this is a landmark study. I
think these guys have gone a long way to turn hypotheses about
early-stage Internet startups into facts. And they’re just
getting started.